Hi, please solve this :) Thanks!! Newtown Propane currently has $575,000 in tota

Question

Hi, please solve this :) Thanks!!

Newtown Propane currently has $575,000 in total assets and sales of $1,720,000. Half of Newtown's total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 21% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is $157,500 Newtown was using its fixed assets at only 95% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets? $1,901,052 $1,448,421 $1,629,473 $1,810,526 When you consider that Newtown's fixed assets were being underused, its target fixed assets to sales ratio should be When you consider that Newtown's fixed assets were being underused, how much fixed assets must Newtown raise to support its expected sales for next year? $34,385 O $40,832 O $42,981 O $47,279

Explanation / Answer

Question 1:

Sales at 100% capacity = $1,720,000 / 95%

= $1,810,526

Question 2:

Target fixed assets to sales ratio at full capacity = $575,000 * 0.50 / $1,810,526

= 0.1588

Question 3:

Fixed assets to be raised = $1,720,000 * (1+21%) * 0.1588 - $575,000 * 0.5

= $42,981

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